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tv   Options Action  CNBC  October 20, 2017 5:30pm-6:00pm EDT

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hey there, we're live at the nasdaq market site brian and the guys are getting ready. while they're doing that, here's what's coming up you're looking at a small portable computer called the ibm 5100 it's helping a lot of different people do their work more productively >> and ibm shares have helped investors reap productive gains. and it's pointing to an even bigger rally we'll tell you how to cash in. plus one group of stocks seems poised for a breakout next week here's a hint.
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and talk about a way to get long on apple for just three bucks. >> no way! >> way and we'll show you how it's time to risk less and make more the action begins right now. next week is the busiest one for earnings season. we'll hear from 172 s&p companies, names like mcdonald's, amazon, alma bet, microsoft, ubs you get the picture. the earnings picture has been pretty positive, 70% of the companies have eps beat. let's get in the money right now, mike. >> this is interesting we have a little bit of a volatility paradox going on. frequently we hear people expressing a lot of concern about valuations i don't know that valuations necessarily are the precursor to a potential drop i think i look at volatility, i
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see it as low as it is and i see actually continued confidence in the market right here the other thing is that we are seeing some dispersion that is, on these earnings results, we've seen financials, for example, which probably did a little bit better on an operating basis than most people thought. stocks don't move. you see something like materials, stocks do well. industrials not so much so when you take a look at that mix, you have stocks going different directions that basically will create some sto steadiness in the market market unsteadiness will cause investors -- >> to mike's point, we've seen for a couple of years this rotation in different sectors. if you have this dispersion, you're going to get active managers back in the space, moving between sectors that's going to give you opportunities. >> that doesn't mean things aren't correlated. >> exactly what we've had so far is the index funds, right now things are not correlated, separating you have opportunity >> in terms of just the quarterly cycle here, the thing
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that's really important is that the revenue has been better than expected earnings, if you looked at the blended average, companies that reported and those that have yet to report, it's running only about 1.7%, a fairly muted return surge the top line for the first time is exceeding the bottom line and exceeding estimates. that obviously is important. >> it's a lot harder obviously for management to manipulate revenues you can have share buybacks that can boost earnings per share revenues, that basically tells the tale if it's growing at a rate better than expected, that signals there is some underpinning strength >> carter, you're taking a look at a sleeper pick. >> let's look at ubs industrials had a big day today. obviously a huge laggard, speaking about a sleeper coming to life, ge. ubs has earnings next week i'll make the bet it will be good or, said differently, it's going to go up whether good or bad. ubs is ipo, it is a market
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performer. these numbers speak for themselves the issue is, of late, since inception back in '99, ubs versus the s&p, it's a dead heat now, from the absolute low, the 6th of march 2009, this is where it gets interesting. ups has lagged the market. now more immediately, take a look at where we are over the last one or two years. again, this is the opportunity that ups has lagged, it's a big name, we know what's going on in sort of internet shipping, and i think it's a name to play. no drawings or annotations by me what's important is that we're right at the prior high and the presumption is, is that after we back and fill in this high, we can exceed it. if you put in an actual, you'll get this line here i think you're going to get your breakout here. i'm going to make a bet that ups will make a high
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you want to be long in earnings. >> mike? >> this is an interesting case usually earnings are large contributors to price movement actually in the case of ups, the movement on earnings is typically around 2%. where you do often see a lot of movement is through the holiday season they've had operational challenges historically this time of year they've had some situations where they've ultimately disappointed in the next quarter. the best way to do this, especially with options premiums as low as they are is to buy the 120 calls, those were about $3.20. you're spending approximately $3 of, you know, relative to the current stock price to make that bullish bet, it only has to move up 3% between now and january. the chances that it makes a move of that magnitude or larger is very, very good. i don't expect it necessarily to be earnings. >> what do you think of the trade? >> i'll have to disagree with carter and mike khouw. we've seen some other headwinds coming out there amazon's going to have their own
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air fleet. there's other issues in the last couple of years they've had those operational issues i would rather take the shot on the short side here. >> don't you think, though, what is really going to propel the stock ultimately will be how holiday season operates for them they've had some operational challenges, they seem to be sorting those things out these are companies that will benefit from an separating expense from emerging technologies i mean, those are all potential benefits they're doing some other things with their less than full truck level, deliveries that are probably going to benefit them as well. trading stay of at a discount to its historical valuation >> discount to the market. >> to me there's more risk that they don't hit the numbers, that they don't hit expectations. >> do you think the market will be higher through january? do you think the market will be higher through january >> yeah. yeah >> you think this is going to diverge further from the market? even in a -- >> yes
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>> -- rising tide? >> or that the gap is going to be filled, the disparity between the two stocks won't be filled >> that's the bet you're making. >> it's a sleeper that's going to surprise. >> now to a stock that was a big winner this week, that would be ibm, the mvp of the dow, surged 10%, a surprising move given the stock's troubled past. who better to break it down than our very own mvp, dom chu. >> reporter: melissa, ibm hasn't been exactly pulling its weight when it comes to the overall market no secret, it's been one of the big laggards of the dow and the broader market year to date and the last 12 months but the earnings report tuesday afternoon went a long way to clawing back some performance. by the time the dust settled on wednesday's close, big blue had gained close to 9%, its best daily performance since january 21st of 2009 that was the day it gained over 11%. it was also the best post earnings day for the stock going back to 2002
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according to bespoke investment group, it was only the third time in the last 18 quarters when the stock actually gapped higher after an earnings report. we saw that play out in the options action, options trading volume for ibm four times greater than average if you look at the vast majority of that volume, yes, it happened after the earnings report was released so could this be a turning point in sentiment for big blue? the skeptics say it will take a lot more to get the stock on track. the bulls say this could be that turning point on a stock that many have given up on, melissa, the debate rages on. >> we'll take it to the desk, thanks, dom chu back at headquarters bk, do you think this was the moment for ibm >> i do. this is a change in sentiment. this is the change in the way the company is operating in the way they market, people are perceiving that. we've had the turnaround story that the market has not believed for a long time. after this quarter you have to
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believe in this turnaround story. to me i think they hit all the different areas, the growth areas going forward. talk about, you know, this is underperforming the market i think this has much more potential to outperform than the other names. >> from a fundamental standpoint we've seen this, mature companies, companies like microsoft and so on, where people were concerned that they were not evolving and weren't going to be able to take advantage of services, things like cloud, ai, obviously something ibm has been touting a great deal of. i think this signals that -- and we have such bad performers coming into this point so if there wasn't actually a big sentiment change we wouldn't have seen this big pop there would have been plenty of ready sellers and there weren't. it seems to me people believe this is going to be it you still have a lot farther to go you're talking about a company that had over $100 billion in revenue. they've got a long way to go >> here is what this is. there's no operating business per se what they've done is cut their
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float in half. they eat themselves for a living, they buy back their shares they've done it more aggressively than any other prominent company out there. this is a measure of technique when something gaps up, it usually is not an isolated event. typically you get two or flee gaps you have two down and a quarterly miss a quarterly beat this aggressive is typically followed by something that's equally aggressively the risk aggressive you get back to those drops in may. we've got a chart that might show that. that's the upside. >> wow >> what do you know? i should agree with him on ups, now i feel bad >> 3.7% dividend is not bad either, while you're waiting for this to gap higher >> if they can get -- if the market gives them a pass, i think they'll ultimately start giving them a pass similar to how they give amazon a pass, and
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you believe in this story, the expectations i think are still too low for this company, therefore surprise to the upside for everything "options action," check out our website while there sign up for our super cool newsletter, an absolute must read here's what's coming up next apple's market cap is north of $800 billion. >> good lord, that's a lot of money. >> it sure is. we'll show you how to buy shares for just three bucks plus calling all "options action" fans reach into your pocket, grab your phone and tweet us your question @optionsactions if is nit'ce, we'll answer it on air, when "options action" returns. >> logical i think it's terrific. your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late.
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td ameritrade's elite service team can handle your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.
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well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate.
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the earnings tool from td ameritrade. welcome back to "options action." apple unveiling its new flagship store in chicago today josh boltl lipton is there with. hey, josh. >> reporter: the governor of illinois just walked into this apple store, the mayor of chicago, rahm emanuel, is here as well. i'll have the cameraman pan over this is a line of people waiting to get in the store which is going to open its doors for the first time here at the top of the hour also on hand here today was apple's ceo tim cook who talked about why he thought it was important to be here for this opening. >> our very first flagship was right here in chicago in 2003. now, 14 years later, we're here in this beautiful store with a great connection to the community, in a larger way than ever it's lot all of our latest
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innovations in the store, and a connection to the community that's deeper than anything we've done before. so it feels fantastic. >> reporter: so apple of course isn't the only big tech company opening new brick and mortar stores there are others, for example amazon is too. but apple retail chief angela ahrens told me she isn't worried about that competition >> i don't think about it frequently i've read their investing, alibaba is investing, google says they're going to invest billions and open up stores. honestly, i think it's great for the economy. i think it's great for employment and i think that it reinforces that physical retail is not going away, there is a purpose people want the human connection they want a place to pick up their products, et cetera. i think the great news is, as you said, we're nearly 500 stores ahead of them the tenure of our employees is unbelievable we have an over 80% retention rate in america alone. so i think it will take them a
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little while to catch up >> reporter: and more stores are on the way, including washington, d.c., paris, and milan. melissa? >> thank you very much, josh lipton in chicago. apple shares have been under pressure in the last month after unveiling its next generation iphones, that stock down 4% since the debut. with earnings and the release of the iphone x two weeks away, how should you play it mike is in tat the plasma with a call to action >> one thing we would expect is the stock is not going to move that much in the near term we're looking at near term consolidation. the other thing you're looking for is a longer term catalyst. you might say we've got earnings coming up first week of november the catalyst will be holiday earnings, not so much the earnings event and then finally, oftentimes options premiums get a little bit elevated into earnings i want to sell that premium and buy the holiday move
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so we can take a look at this stock price here we can see basically what's been going on, down slightly as you pointed out. doesn't seem that strong to me i'm not expecting great earnings out of this for those reasons. and this is the trade. pretty easy. for $3 we can buy the november/january 160 calls you can buy the januarys for $5.85. you can sell the novembers for $2.85. i don't expect these to decay that much. this is kind of the money you're hoping to collect. but you're only risking about 2% of the current stock price to do this trade >> you like calendar spreads >> i really like this trade in this particular case, because you have two catalysts, right? when you're looking at that, it comes out well it's the holiday season that matters. i like it a lot. >> i get nervous when somebody starts drawing lines all over the chart. >> listen, if you think about it, a chart is just a pictorial
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representation of the collective judgment of market participants. think if one were to take that and look at this chart here, maybe, what we know is that apple has broken trend it's not a big break, it's not a massive rollover but its performance is sluggish. that's what the word dormant is about. it's what you're trying to do in this trade the stock is the same price it was in late may. think where the market is versus late may >> the trade we're making is it's going to be essentially in the same price after earnings. really what people want to know is, are their products going to sell really well, these new stores, the one in chicago, not just going to be a destination for people to go and look at product but to actually buy it they obviously have very good retail sales per square foot that won't be the only answer for this company we'll need to see strong holiday sales for it to go higher from here >> we do have the earnings and then the x launch. we'll get data points on how well the preorders have come in. >> that's the data points, two
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or three weeks ago, there's always these things lurking. >> that's why this trade is great. i don't think much is going to happen into earnings then after that in the holiday season i suspect josh lipton will be showing us all the lines out there. lines are big, apple goes higher lines are small, apple goes lower. >> we like situations where we can sell a premium into events here we're buying some longer premiums, we're selling the shorter dated one. intel hitting its highest level in 17 years today. the charts are pointing to even more gains we'll break it down. a question for one of the traders? send us a tweet. maybe 'll adwere it later in the show if it's nice. more "options action" still ahead. i think it's terrific. your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late. td ameritrade's elite service team can handle
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your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.
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i'd of said... i'd of said you're dreaming. dreaming! definitely dreaming. then again, dreaming is how i got this far. now more businesses in more places can afford to dream gig. comcast, building america's largest gig-speed network. now more businesses in more places can afford to dream gig. well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. welcome back to "options action." time to look back on some of our open trades. three weeks ago carter and mike
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khouw said there would be a breakout >> specifically what i'm looking at is the 165 october/january call spread. i could buy the january 165s for $4.65, sell the october 165s at a $1.05. >> the first leg of your trade expires today. >> that expired worthless, that's exactly what we want to have happen. we're still long the longer dated call do we think the breakout is going to happen? otherwise i'll sell the november 165s again >> we've got this breakout, it's fallen back to where we started. if you can buy more time, the presumption is home depot goes higher >> and we have that time, that's why we have the calendar up. >> exactly three weeks ago dan bet intel
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shares are going higher. he bought the calls expiring next week. intel shares are up already more than 6%. you may have noticed dan isn't here with us today but he did send us a message from an undisclosed apparently would they area in upstate new york to tell us how he's managing this trade. >> hello, "options action" viewers. sorry i can't be here today to accept this award of sorts i want to give you an update on the intel trade. it was targeting earnings this week, at the time it was october 27th weekly 38 calls for 80 cents. we'll roll them up to the october 40s. those are also about 85 cents right now when the stock was trading at 40/30 thanks a lot good luck. >> very undisclosed. >> i know. >> it was like one of those ones were they do the blurring. >> he could be at a home depot for all we know, in the back mike, what would you do here >> i trying to he with him on this that was really a great trade. options premiums were simply too
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low. you basically had the calls trading what they would be worth the day before earnings, weeks before earnings. now he's looking at these 40 strike calls they're only trading very slightly above parity. that's a good way to make your bullish belts. >> 17-year high on intel, wow. >> i like this trade i'm curious what dan is hiding from, it's whispering in the woods. it's creepy. >> it essentially like he's on the lam or something like that >> this is a classic sleeper trade. semis have been hot and intel was lagging. this is the kind of thing you can get if you get a catch-up trade. it's fantastic >> all right up next, your tweets and the final call from the options desk i think it's terrific. your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late.
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td ameritrade's elite service team can handle your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.
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well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. our first fan says, hey melissa lee, it's a nice tweet, please read it just did
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moving on. michael asks, what's the options play leading up to microsoft earnings next week >> volatility, again, has been so low, this stock still looks pretty good to me. you want to make that basically principal, look out to january >> that chart looks pretty good. >> here's something, never in its history has it gone this long without having a check back to its 150 day moving average. >> is that good or bad >> is certainly is good. >> our next one, brian kelly, bk is the tesla double top played out? what are your views into earnings >> certainly, i think it will break 345. you want to be aggressively short. the double top is in and going lower. last word from the options pit. carter braxton worth >> long ups into earnings for 5, 6% move to 125 >> january call is in ups to make that play >> thank you for joining us. >> thanks for having me, it was a lot of fun i like to make hay when the sun
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shines >> looks like our time has expired. i'm melissa lee. thanks so much for watching. check out our website or tweet us @optionsaction. see you back here . my mission is simple, to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. >> hey i'm cramer. welcome to "mad money," welcome to cram america. i'm just trying to make you some money. my job is to educate and teach you. call me 1-800-734-cnbc or tweet me @jim cramer we're coming in hot and the stakes hav

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